MBNA Corp. is forming a joint venture with the retail bank and credit card issuer Ixe Banco SA to issue credit cards and make consumer loans in Mexico this year.
With U.S. receivables growth expected to remain slow this year, issuers are looking to diversify into other countries and types of lending. MBNA has been hurt by consumers' paying off their balances; in the 12-month period that ended March 31 its loan book shrank 0.82%, to $116.6 billion.
James Donahue, an MBNA spokesman, said Friday that credit card use in Mexico has tripled over the past four years. Consumer loans outstanding rose 46% in the 12 months through Jan. 31, to $8 billion, and credit cards accounted for 51% of that borrowing.
According to a March 2003 report by Mexico's central bank, there were 8 million credit cards and 33 million debit cards in circulation there.
The formation of the venture, Ixe MBNA Sofol, is expected to be finalized next quarter. A yet-to-be-chosen MBNA executive would head the venture, which would take over card issuing for Ixe Banco, a unit of Ixe Grupo Financiero.
Mexico would be the fifth foreign market for MBNA. The Wilmington, Del., issuer operates in Canada, the United Kingdom, Spain, and Ireland.
Other companies issuing cards in Mexico include Citigroup Inc. (through its 2001 acquisition of Grupo Financiero Banamex-Accival), HSBC Holdings PLC, BBVA Bancomer, Santander-Serfin (a unit of Spain's Grupo Santander), Bank of Nova Scotia, and Bannorte Banco Comercial CA.
Ixe Banco, which runs 27 branches in the Mexico City area, "is led by a proven management team, and the Mexican market for credit card products and consumer loans is large and growing," MBNA's chief operating officer, John Cochran, said in a press release issued Friday. "We will benefit from Ixe's experience in Mexico, and Ixe will benefit from MBNA's experience in marketing and servicing credit cards."
Mr. Donahue said he did not know what type of consumer loans the venture would offer. Ixe MBNA Sofol would be the first venture of its type for MBNA, which typically enters countries on its own, he said.
The venture would own the receivables and manage risk and acquisitions. Each partner would contribute 50% of the necessary capital. (MBNA would not disclose the amount.)
Ixe MBNA Sofol would use Total System Services Inc. of Columbus, Ga., which has processed Ixe Banco's credit card portfolio for about eight years.
